Financial Review

The Good, the Bad, and the Depressing

DOW + 129 = 16,956 SPX + 13 = 1973 NAS + 50 = 4458 10 YR YLD + .05 = 2.56% OIL – .13 = 105.24 GOLD – .80 = 1327.10 SILV + .02 = 21.08   Record high closes for the Dow and the S&P.   The record setting bull market run refuses to stumble. The S&P 500 has not seen a correction, a drop of 10%, for 1,002 days, and counting. This marks the fifth longest stretch without a correction since 1928. The average time between corrections is about 18 months; we’ve now gone 33 months without a 10% pullback.   The Institute for Supply Management said its manufacturing index registered 55.3% in June, down slightly from May’s reading of 55.4%. Any number above 50% signals expansion. Separately, the research firm Markit said its final reading of US manufacturing conditions in June totaled 57.3, compared with a preliminary reading of 57.5; still the highest reading since May 2010. So the manufacturing sector has expanded for 13 consecutive months, but it wasn’t a month over month increase, and we have to remember that manufacturing was expanding in the first quarter as the broader economy was contracting by 2.9%. Today’s reports were decent news for manufacturing, but hardly great.   The Commerce Department reports construction spending increased 0.1% in May, following a 0.8% increase in April. Construction activity totaled $958 billion at a seasonally adjusted annual rate in May, up 6.6% from a year ago. Single-family home construction was …

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Financial Review

Tuesday, July 01, 2014 – The Good, the Bad, and the Depressing

The Good, the Bad, and the Depressing by Sinclair Noe   DOW + 129 = 16,956 SPX + 13 = 1973 NAS + 50 = 4458 10 YR YLD + .05 = 2.56% OIL – .13 = 105.24 GOLD – .80 = 1327.10 SILV + .02 = 21.08   Record high closes for the Dow and the S&P.   The record setting bull market run refuses to stumble. The S&P 500 has not seen a correction, a drop of 10%, for 1,002 days, and counting. This marks the fifth longest stretch without a correction since 1928. The average time between corrections is about 18 months; we’ve now gone 33 months without a 10% pullback.   The Institute for Supply Management said its manufacturing index registered 55.3% in June, down slightly from May’s reading of 55.4%. Any number above 50% signals expansion. Separately, the research firm Markit said its final reading of US manufacturing conditions in June totaled 57.3, compared with a preliminary reading of 57.5; still the highest reading since May 2010. So the manufacturing sector has expanded for 13 consecutive months, but it wasn’t a month over month increase, and we have to remember that manufacturing was expanding in the first quarter as the broader economy was contracting by 2.9%. Today’s reports were decent news for manufacturing, but hardly great.   The Commerce Department reports construction spending increased 0.1% in May, following a 0.8% increase in April. Construction activity totaled $958 billion at a seasonally adjusted annual rate in …

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Financial Review

Wednesday, June 04, 2014 – An Airtight Defense

An Airtight Defense by Sinclair Noe   DOW + 15 = 16,737 SPX + 3 = 1927 (record close) NAS + 17 = 4251 10 YR YLD + .01 = 2.60% OIL – .27 = 102.39 GOLD – 1.30 = 1244.60 SILV – .01 = 18.90   Eight times a year the Federal Reserve gathers economic updates from the 12 districts and publishes the information about two weeks before its FOMC meetings. The data is published in a beige folder, and that is why it is called the Beige Book, although it might actually refer to the writing style. Anyway, economic activity expanded all across the country, with most districts reporting moderate or modest growth. Consumer spending expanded across almost all districts. Tourism was another bright spot and manufacturing activity expanded across the country. Home sales were described as “mixed across the country” even as home prices continue to rise. Labor markets were described as steady. Inflation was tame, with a slight exception for higher food prices in some areas.   In other words, when the Fed meets in a couple of weeks, there won’t be any big changes in monetary policy.   The Institute for Supply Management said its services index rose to 56.3%, its highest level since August, from 55.2% in April. That’s the number and they’re sticking with it.   The US trade deficit grew to $47 billion in April, up from $44 billion in March. Exports slowed in April, down slightly to $193 billion. Imports, meanwhile, …

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Financial Review

Monday, June 02, 2014 – Clean Power Plan

Clean Power Plan by Sinclair Noe DOW + 26 = 16,743 SPX + 1 = 1924 NAS – 5 = 4237 10 YR YLD + .07 = 2.53% OIL – .31 = 102.40 GOLD – 7.80 = 1244.50 SILV – .05 = 18.86   The ISM got it wrong this morning. The Institute for Supply Management reported its May manufacturing index came in at a weaker than expected 53.2, but there was a software problem that didn’t properly reflect season adjustments; the ISM issued a revision; the May index was 56.0; but for some reason, that wasn’t correct, so they issued another revision. The May manufacturing index was 55.4; that’s the number and they’re sticking with it. Embarrassing? Yes.   Meanwhile, stocks and bonds were all over the board. Stocks fell into negative territory early on, but bounced back as revisions were issued. Bonds are hyper sensitive to economic growth, and the yield on the 10 year note moved higher and stayed higher, despite the initial numbers and the revisions. And if you look past the revisions, and you should, because it appears to be nothing more than an honest mistake, caught quick and corrected; the bottom line is a pretty strong number for manufacturing, more or less in line with the idea of a second quarter bounce in the economy.   The bigger story this week will be the jobs report on Friday. It is widely expected the economy added about 200,000 to 215,000 jobs in May, which would …

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Monday, March 03, 2013 – Carry On

Carry Onby Sinclair Noe DOW – 153 = 16,168SPX – 13 = 1845NAS – 30 = 427710 YR YLD – .05 = 2.60%OIL + 2.20 = 104.79GOLD + 21.70 = 1351.30SILV + .18 = 21.51 Manufacturing expanded at a faster pace than projected in February. The Institute for Supply Management’s (ISM) manufacturing index rose to 53.2 from 51.3 in January. A reading above 50 indicates expansion in manufacturing activity. Consumer spending in the US climbed more than forecast in January, reflecting the biggest increase in services in over 12 years. Household purchases rose 0.4%, after a 0.1% gain the prior month. Disposable income, or the money left over after taxes, rose 0.3% after adjusting for inflation. It dropped 0.2% in the prior month and was up 2.8% from January 2013. The saving rate was 4.3% in January, unchanged from the prior month. Wages and salaries increased 0.2% after dropping 0.1% in December. The big economic report this week will be the monthly jobs report on Friday. Faster than you can say “the Russians are coming”, they invaded Ukraine. Moscow now has operational control of the Crimean Peninsula, with about 6,000 airborne and ground troops. Russia has military bases on the Red Sea, but the troops have gone off base. The Russians have just taken over without any real fighting; indeed, many Crimeans are sympathetic to Russia. Ukraine has a large Russian ethnic minority, which it inherited mainly as the result of Soviet policies, including a re-drawing of the inner map …

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Monday, February 10, 2014 – Set the Tone

Set the Tone by Sinclair Noe DOW + 7 = 15,801SPX + 2 = 1799NAS + 22 = 414810 YR YLD + .03 = 2.69%OIL + .12 = 100.00GOLD + 7.90 = 1276.00SILV + .07 = 20.18 A little bit of follow up to last Friday’s jobs report, which you recall came in at 113,000 jobs added in January and the unemployment rate dropping to 6.6%. There was a huge discrepancy between the household survey and the business establishment survey; the household survey showed 616,000 new jobs. The household survey can be a bit volatile and is considered less reliable. There is also a discrepancy between the establishment survey and a couple of earlier reports from ISM and ADP. The Institute for Supply Management services index came in at 56.4% in January, indicating a strong month for service jobs. The ADP, or Automatic Data Processing, employment report indicated 160,000 private sector service jobs were created in January, or about 100,000 more jobs than the government reported. It will be very interesting to watch revisions to the jobs report next month. The major stock indices just loved the lousy jobs report, and this is a head scratcher for many people. Why would bad news on jobs be good news for stocks? Well, a weak job market gives employers the upper hand because most workers will accept lower wages, which translates into higher profits for corporate America. I know that is short sighted because the workers are also customers, but in the …

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Monday, February 03, 2014 – Another Piece of Cake, Marie?

Another Piece of Cake, Marie?by Sinclair Noe DOW – 326 = 15,372SPX – 40 = 1741NAS – 106 = 399610 YR YLD – .09 = 2.58%OIL – .78 = 96.71 GOLD + 11.20 = 1258.10SILV + .17 = 19.44 In economic news, manufacturing activity slowed sharply in January on the back of the biggest drop in new orders in 33 years while construction spending barely rose in December. Maybe it had something to do with the cold weather, maybe it’s just a pause after slightly stronger economic growth in the third and fourth quarters. The Institute for Supply Management (ISM) said its index of national factory activity fell to 51.3 last month, its lowest level since May 2013, from 56.5 in December. It was the second straight month of slowing growth from November’s recent peak reading of 57, which had been the highest since April 2011, and indicated manufacturing was slowing after output grew at its fastest pace in nearly two years in the fourth quarter. Underscoring the weather impact, delivery delays increased a bit last month, but the biggest red flag was the huge drop in the forward-looking new orders index, which fell to 51.2 from 64.4 in December. That 13.2-point drop was the largest monthly decline in the key component since December 1980. In a separate report, the Commerce Department said construction spending rose 0.1% in December, slowing from the prior month’s 0.8% increase. While private construction spending hit a five year high, outlays on public construction projects …

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Monday, January 06, 2014 – A Cold Forecast

A Cold Forecast by Sinclair Noe DOW – 44 = 16,425SPX – 4 = 1826NAS – 18 = 411310 YR YLD – .03 = 2.96%OIL – .31 = 93.65GOLD – .20 = 1238.80SILV + .02 = 20.27 A few big things this week. Friday we’ll see the monthly jobs report. Today we had the confirmation of Janet Yellen, no surprise there; on Wednesday we’ll see the minutes of the most recent FOMC meeting which will give us the justification for the taper. The minutes will likely include strong differentiation between taper and tightening, and the Fed is likely to stress the importance of accommodative monetary policy and ultra-low interest rates for the next 18 months or so. Any bond gains have been curbed as we start the new year; a combination of the Fed slowing its bond purchases, plus corporate supply, plus there is still the safe haven aspect of bonds in the face of a few days of weakness in the equity markets. This Friday’s jobs report will prove important as a barometer for yields. More than 2.2 million jobs were probably created in 2013, the most since about 2.5 million eight years earlier. The estimates call for 195,000 net new jobs in December and the unemployment rate to hold at 7.0%. If the economy added more than 200,000 jobs we might expect a more aggressive taper; fewer than 200,000 jobs and the taper might be more sanguine. Healthcare spending in the US rose 3.7% in 2012 to $2.8 …

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Wednesday, December 04, 2013 – The Defining Challenge

The Defining Challenge by Sinclair Noe DOW – 24 = 15,889SPX – 2 = 1792NAS +0.80 = 403810 YR YLD + .05 = 2.83%OIL + 1.25 = 97.29GOLD + 19.00 = 1244.30SILV + .54 = 19.82 December can be a cold, cold month. At least that’s how the equity markets are starting the month; four losing sessions. Part of this might be the big institutional investors, the big hedge funds and money managers, looking around and realizing the market is up 30% or so, and that would be a good year, so why no lock in a few profits. No need to worry about the budget battle in Washington; no need to worry about the Federal Reserve surprising people with a premature taper; no need to worry about a strong jobs report on Friday. In this crazy market where good economic news gets traders worried about the Fed taking away the punch bowl, today we had some reasonably decent economic news and another drop in the markets. Let’s start with the economic reports. ADP, the payroll processing firm, has a monthly report on private jobs; they issue the report just before the monthly official government report on jobs, the BLS non-farm payroll report. The ADP report is not great at predicting the government report, but its one of the better guidelines we have. Today, ADP reported companies added to their payrolls by a net 215,000 in November, and they revised the October number higher to 184,000. Manufacturers, builders and other …

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Monday, December 02, 2012 – The Home Stretch

The Home Stretch By Sinclair Noe DOW – 77 = 16,008SPX – 4 = 1800NAS – 14 = 404510 YR YLD + .05 = 2.79%OIL + 1.19 = 93.91GOLD – 32.80 = 1220.30SILV – .73 = 19.31 Stocks were down today. There are many possible explanations, but the one that makes sense to me is that we just couldn’t have a record high celebration with milk and cookies; not after all the pie I ate over the holiday. There are other explanations as well. Anyway, we survived Black Friday, mainly by sitting it out. Black Friday comes with its own unofficial economic data point as the most important shopping day of the year. And we always hear the erroneous, or at least mildly misleading caveat that consumer spending accounts for nearly 70% of gross domestic product, making this large shopping day extra important. Thanksgiving and Black Friday combined brought in an estimated $12.3 billion in sales, according to shopping analytics firm ShopperTrak. Thanksgiving Day traffic grew 27% as nearly one-third of shoppers headed to stores on the holiday. About 97 million people planned to shop online or in stores on Friday, with about 140 million intending to do so Thanksgiving through Sunday. That’s down from 147 million last year. Overall spending was expected to reach $57.4 billion for the weekend, that’s down from $59.1 billion last year. Thanksgiving and Black Friday fell a week later in the season this year, leading stores to push pre-Black Friday deals and shifting consumer …

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